Draft Climate Law is submitted to the Parliament

Considering the developments in the EU in terms of the net zero emission target of the Green Deal, Türkiye is also working towards establishing its own carbon pricing system and to enact legislation to fight against climate change. The third Draft Climate Law, brings considerable changes as compared to the previous one and has been submitted to Turkish parliament as part of these efforts.

According to the third Draft Climate Law dated 20.02.2025, the following instruments will be used to fight against climate change in line with the principles of climate justice, precautionary principle, participation, integration, sustainability, transparency, fair transition and progress:

• Establishment of the Türkiye Green Taxonomy (“Taxonomy”) by the Presidency of Climate Change (the “Climate Presidency”) to contribute to the mobilization of climate finance by setting principles and criteria for economic activities that contribute to combating climate change in line with set environmental goals;
• Preparation of a National Contribution Declaration on a periodical basis designating the strategic and action plans to decrease greenhouse gas (“GHG”) emissions and carrying out of climate change adaptation activities in line with the NDC, such as net-zero targets, and strategy plans to mitigate climate risks and leverage opportunities
• Development of resources for climate financing and incentivization of green/sustainable capital market instruments by governmental authorities (i.e. establishment of an Emission Trading System (“ETS”) market and voluntary carbon market by Borsa Istanbul);
• Establishment of a carbon border adjustment mechanism for dealing with embedded GHG emissions of goods imported into the Customs Territory of Türkiye.
• Implementation of measures to reduce the impacts of climate change on ecosystem and biodiversity and establishing of disaster risk assessment, early warning systems to reduce climate-related losses.
• Establishment of institutes, research and application centers under the Climate Presidency
• Organising trainings to increase public awareness;
• Revision of curriculums to include climate change factor to Turkish education.

In addition to the above, as a carbon pricing mechanism, an emission trading system will be established limiting the GHG emissions and GHG-causing activities, by way of the trading of GHG emission allowances, in parallel to the EU practices.

Businesses, the operations of which result in carbon emission, will become obliged to obtain a GHG emission permit to continue their operations, within 3 years as of the enactment of the Draft Climate Law.

The Draft Climate Law also regulates the establishment of a Carbon Pricing Board, which will be authorised to determine the carbon pricing instruments (i.e. ETS) and breakdown of free allowances which will be granted within the scope of an emission trading system.

The new draft has tightened administrative penalties by increasing fines and expanding sanctions comparing to the previous draft. The new draft also introduces penalties for misleading statements and documents, capping administrative fines at 50 million TL, and allows for a remedy period of up to one year.

The ETS sanctions have also been tightened comparing to the previous draft. For example, the penalties imposed on ETS-covered businesses are no longer limited to fines and additional measures such as revocation of permit, suspension of operations, and stricter enforcement mechanisms have been introduced to ensure strict compliance with emission tracking and environmental standards.

A settlement system will also be introduced by meeting the allowance obligations with carbon loans. The Draft Climate Law envisages a grace period during which the administrative fines imposed due to incompliance with the law will be reduced by 80%. This ratio was determined as 50% in the previous draft. The length of this period and the content will be finally determined by the Carbon Market Board based on the views of governmental authorities and civil society organizations.

Preparation and adaptation obligations regarding legislation and planning tools shall be fulfilled by the relevant institutions and organizations until 31/12/2027 at the latest. The President is authorized to extend this period up to one year.

The Draft Climate Law mainly focuses on emission trading and is therefore criticized for not prioritizing the fight against climate change. Notwithstanding it is a major step for Türkiye, especially in relation to its meeting the standards of the Green Deal Action Plan and its trading with the EU in both ways.   Since the details and operation of the system will be regulated by secondary legislation, a clearer view can be formed in terms of the actual functionality of the newly introduced legal framework regarding the elimination of carbon tax risk under the CBAM mechanism, reaching the net zero emission targets and especially its ability to fight against climate change, once the secondary legislation is enacted.